Important information on the changes to red diesel duty
The government announced changes to red diesel duty at the 2020 budget, they are set to remove the allowed usage of rebated diesel and biofuels from most sectors from April 2022 to help meet its climate change and air quality targets.
The tax changes have been designed to more fairly reflect the harmful impact of the emissions that are produced when using rebated fuel to the same of “on road” users like motorists.
Red diesel, which is chemically marked and dyed, helps law enforcement agencies to identify it as rebated fuel and detect when it is being used for the wrong purpose, providing a deterrent to fuel fraud.
Diesel intended for the use in engines of road going vehicles, otherwise known as ‘white diesel’ (because it has no marker or dye), has a fuel duty rate of 57.95 pence per litre (ppl).
Rebated diesel is entitled to a rebate of 46.81ppl, giving it an effective duty rate of 11.14ppl.
The changes will also extend fuel duty to biodiesel, bioblends and fuel substitutes used for heating, applying the rebated duty rate to non-commercial heating and the full rate of duty to commercial heating.
From 1st April rebated fuel will only be allowed for specific purposes when using certain machines, vehicles, vessels and appliances.
- Agriculture, horticulture, fish farming and forestry
- Vehicles used on railways
- Non-commercial electricity generation and heating
- Community amateur sports clubs and golf courses
- Sailing, boating and marine transport
- Travelling fairs and circuses
Any business outside of this usage must make the switch to a diesel or biofuel on which the full duty has been paid.
- Fully rebated kerosene is unaffected by these changes and can be used for all heating uses.
If you have a large volume already in reserve and are concerned you will not be able to use or dispose of it, you can contact firstname.lastname@example.org.
HMRC acknowledge that in order to maintain minimum stock levels, fully paid duty fuel will be mixed with rebated fuel and leave a red indicator beyond April 2022.
Any dips and checks will require all relevant invoices and documentation to prove no rebated fuel was used after this date and only white diesel has been purchased after this date.
How to prepare for the changes if you’re affected?
You will be expected to check how much stock you’re likely to need between now and 1st of April and order only the amount you expect to use by this date.
You are not expected to flush out your existing tank, just to make sure you keep receipts and records of all deliveries to prove you have used fuel paid at the correct duty after this date.
If you have any surplus rebated fuel in your tank after 31st March 2022 you will need to:
- sell or give it to someone who is allowed to use it
- sell or give it to any Registered Dealer in Controlled Oil (RDCO)
- dispose of it via an approved waste oil recycling or disposal company
Frequently Asked Questions
HMRC have been very clear on this one and it’s a big NO!
Anybody that is thinking of stockpiling the fuel must be directed to the gov website and shown the guidance on how best to manage their stocks so they have run down by the 1st of April 2022.
You can also contact them direct if you are concerned you won’t be able to use up your stocks or safely dispose of the fuel at email@example.com.
After the rules change and you plan to use any vehicle, machine or appliance for allowed and non-allowed purposes you must:
- flush out the tank to remove all traces of rebated fuel when switching uses
- use full duty paid diesel or biofuels
You can use up your stock of rebated fuel after the rules change if you obtained and stored the fuel on or before 10 June 2021. The fuel can be used for any of the following uses:
- contingency backup electricity generation in premises used for commercial purposes
- critical safety and environmental protection appliances in premises used for commercial purposes
If you have stocks of rebated fuel held to be used as contingency backup which were obtained after 10 June 2021, or you cannot change from using rebated fuel for technical or safety reasons, you may be granted a licence by HMRC to continue using rebated fuel.
You would need to apply to HMRC and if they approve the licence, you will need to pay the difference in duty between the two fuels.
You can contact them at firstname.lastname@example.org
If you refuel and use your vehicle (including machines or appliances) in a jurisdiction or country where using marked fuel in that vehicle is allowed, you can use up the remaining fuel in the machine when you return to the UK.
You will need to retain receipts or other documents to show that you have not refilled your vehicle (including machines or appliances) unlawfully in the UK.
You will not need to flush the tank of your vehicle on your return to the UK.
Activities accepted as falling within the definition of agriculture, horticulture or forestry include the:
- breeding or rearing of any creature kept for the production of food, wool, skin or fur, or for the purpose of its use in the farming of land
- growing or harvesting of crops including cereals, combinable crops, roots, tubers, vegetables, pulses, fruit, nuts, grasses, oilseeds and fungi for food, beverages, fodder, fuel or industrial purposes
- growing or harvesting of flowering or ornamental plants
- growing or harvesting of timber or other forestry products
- upkeep of agricultural land such as set aside under environmental management schemes
Anything outside of this e.g. landscaping, dealing in agricultural / horticultural or forestry products, breeding / rearing or keeping of any creature for purposes relating to sport or recreation are not allowed to use rebated diesel.
More information can be found HERE
If any fuel markers are found in the fuel of a vehicle or machine that isn’t allowed to use it, you will be asked to provide evidence to show rebated fuel was put in before the change and is still being used up.
Vehicles found running on rebated fuel unlawfully are liable to be seized. HMRC officers will have the discretion not to seize the vehicle if you can prove using invoices and receipts that no rebated fuel was put in to the tank after the rules changed.
If they have evidence or reason to believe you have put rebated fuel into your vehicle intentionally or recklessly after the rules changed, you may be subject to a hefty fine and civil or criminal sanction.
If you are no longer qualify to use red diesel, you must make the switch to a fully duty paid diesel.
This can be white diesel or a renewable diesel (HVO)
White diesel is around 60ppl higher than red diesel and HVO around 80ppl higher than red diesel (Feb 2022).
If you are currently using red diesel for commercial heating, you will no longer be allowed to use rebated diesel from April 2022.
We would recommend making the switch to our Ultra35 which is unaffected by any of the forthcoming changes.
If you are currently using red diesel for non-commercial heating, you will still able to use rebated diesel after the changes.
An alternative option to this, would be for a boiler engineer to make simple changes to your boiler, enabling you to use kerosene, which is much more cost efficient.
The changes to red diesel usage is fast approaching, but with a little bit of planning, there’s no reason this can’t be a seamless switch to DERV or HVO.
ASK THE EXPERTS
Tate Oil is waiting to answer your red diesel questions, and give you realistic solutions to keep your business moving.
LOOK TO THE FUTURE
Although changes are happening relatively quickly, we do have time to consider how we switch to lower carbon fuels.
Let's work on your business solutions, together
We’re sure you’ll be doing your very best to keep your business compliant with rule changes in red diesel usage.
If there are any grey areas, or anything you’re not sure about, please do not hesitate to get in touch with Tate Oil.